By: Brian Johnson March 1, 2017
Though Macy’s Inc. said Wednesday it had sold the downtown Minneapolis store for $59 million, the new owner has already selected some Twin Cities players to work on the massive redevelopment project.
The New York-based 601W Companies has selected Minnetonka-based Hightower Initiatives and the Transwestern Brokerage Group in Minneapolis to work with Telos Group of Chicago, said Don Kohlenberger, president of Minnetonka-based Hightower Initiatives, which will manage construction for the owner. Telos is a marketing, leasing and consulting group.
Kohlenberger said Wednesday a project schedule hasn’t been determined yet, but more information should be available in the next couple of weeks. A contractor and a design firm have yet to be selected, he said.
Cincinnati-based Macy’s Inc. said Wednesday that it had completed the sale of the Minneapolis store to 601W Companies, which plans to redevelop it into a mixed-use creative office and retail complex.
Macy’s said in a press release that the announcement was the “finalization” of an agreement reached in January for the 1.26 million-square-foot Macy’s complex at 700 Nicollet Mall. The store was built in 1902 for the original Dayton’s department store and expanded several times.
The purchase price works out to $46.83 per square foot.
No certificate of real estate value had been made public as of Wednesday afternoon.
Whether the price was a good deal for 601W is difficult to answer because few had the opportunity to “peek behind the curtain” during the negotiations, said Sonja Dusil, a first vice president with the Minneapolis office of CBRE. Dusil was part of a CBRE team that closed the $315 million sale of City Center and its 51-story office tower late last year.
Dusil said 601W invests mostly in primary markets including New York, Chicago and San Francisco, where commercial property prices are quite high. A secondary market like Minneapolis presents an opportunity to make more by spending less.
“We are seeing a lot of new capital coming to this marketplace seeking yield,” Dusil said Wednesday.
Kohlenberger said the Macy’s redo poses challenges similar to two other downtown projects he has worked on: Mayo Clinic Square (formerly the Block E entertainment complex) and the Baker Center makeover.
That includes dealing with asbestos and other materials that need to be abated, respecting the building’s historical elements, maintaining safe skyway access, and diagnosing pipes, ductwork, mechanical and electrical systems.
Crews will be opening some areas that have been covered up since they were installed more than 100 years ago, Kohlenberger said.
“There’s a lot of peeling away the onion,” he added.
Macy’s chief stores officer Jeff Kantor said in the press release that the retailer talked with a “wide variety of partners in pursuit of a plan that would create the most value for the company and the community” for the 13-story store.
Other potential partners were City Center Realty Partners, which has offices in San Francisco and Bloomington, and a team led by Golden Valley-based M.A. Mortenson.
City Center filed suit against Macy’s Inc. not long after the deal with 601W was announced, claiming it lost hundreds of thousands of dollars on due diligence. Mortenson executives, in an interview last month with Finance & Commerce, said they tried to put together a deal that would have kept Macy’s on lower floors of a redevelopment.
But Macy’s didn’t want to keep a store in downtown. The store will close its doors at the end of March. The 280 Macy’s employees who will lose their jobs when the store closes may be offered positions at other Macy’s stores, according to the press release. Macy’s employs about 1,500 people in the Twin Cities area.
“601W Companies has an exciting vision to redevelop the building into creative office space on the upper floors and to pursue retail opportunities on the street and skywalk levels,” Kantor said in the press release. “We believe this will be an outstanding addition to the downtown Minneapolis community in the heart of the city.”